Small Business, Big Vote-UK-2010

8/14/2019 Small Business, Big Vote-UK-2010

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Small Business, Big Vote

The Route to Recovery

FSB 2010 ManiestoEmployment

Taxation

Finance

Entrepreneurship and Innovation

Low Carbon Economy

Local Communities


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2Maniesto 2010 www.sb.org.uk


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3

Current and uture governments will be orced tomake complex and torturous decisions as they

plot a course to recovery. Based on expert opinion,

extensive research and survey data, this document

aims to inorm the crucial decisions that will be taken

to tackle the budget decit.

This report draws on the top-line results o the most

extensive survey o the small-business community

since the recession began. The FSBICM Research

Voice of Small Business Annual Survey2 reveals

that, despite diculties, small businesses are alreadyleading the way back to growth. The surveys ndings

show that around three in ten small businesses have

seen prots (27 per cent) and sales volumes (30 per

cent) grow in the last year.

More encouraging still, over hal (53 per cent) o

small businesses have continued to introduce new

or improved products or services in the last 12

months. A similar proportion (51 per cent) intend to

introduce new products and services in the next 12

months. Despite the recession, the desire to innovateis undimmed in the small-business community and

might even have been encouraged by the dicult

economic conditions.

Although encouraging, these results should not be

read as a signal to pull the plug on the economic

stimulus just yet. In act, these signs o recovery

strengthen the argument or targeted measures to

nurture this tentative growth.

A sustained recovery will require more nance than thebanks are currently able or willing to give; it will require

a sympathetic tax regime, a stable and predictable

business environment, and targeted measures to

bring on innovation and entrepreneurship. In short,

the government most able to get conditions right

or entrepreneurs and small businesses to thrive will

be the government best placed to guide us out o

recession and back to growth.

Much has already been done to support the small-

business community through this recession and theFSB, never an organisation to merely comment rom

the sidelines, has led the way in proposing measures

such as the Enterprise Finance Guarantee, Financial

Intermediaries, Graduate Internships, the Enterprise

Allowance Scheme and the reorm o apprenticeships.

The proposals contained in this publication build on

our progress to date. They are realistic proposals in

the current climate, in some cases aimed at diverting

unds to small businesses to help the economy

grow or, where additional expenditure is suggested,this will be covered by growth in the small-business

sector. Armed with expert advice rom the Centre or

Economic and Business Research, the Westminster

Business School and survey data rom ICM and

numerous other reports, we propose measures

that will help small businesses to help the UK out

o recession.

John WalkerPolicy Chairman

Introduction

1 Labour Market Statistics (November 2009)2 FSB-ICM Voice o Small Business Annual Survey (2009)

The UK will go to the polls in the midst o an economic crisis.Evidence o recovery is ar rom conclusive and unemploymentcould still grow considerably. In the last year, the nations total netdebt has risen to 800 billion, productivity has been slashed by5 per cent and one in ve under-25-year-olds is unemployed.1


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4Maniesto 2010 www.sb.org.uk


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5

Contents

Executive Summary 7

Section 1: Employment 8

- Reorm the Jobcentre . . . . . . . . . . . . . . 9

- Overhaul apprenticeships . . . . . . . . . . . 10

- Introduce an Enterprise Allowance Scheme . 11

- Introduce short-time working . . . . . . . . . 12

- Declare a moratorium on business regulation 13

Section 2: Taxation 14

- Cut payroll taxes. . . . . . . . . . . . . . . . 15

- Support sel-employment through the

tax system . . . . . . . . . . . . . . . . . . 16

- Tackle Value Added Tax . . . . . . . . . . . . 16

- Reorm pension proposals . . . . . . . . . . 17

Section 3: Finance 18

- A renewed and targeted economic stimulus . 19

- Bring greater competition to the

banking sector . . . . . . . . . . . . . . . . . 20

- Restore trust between banks and small

businesses. . . . . . . . . . . . . . . . . . . 21

- Develop alternative orms o nanceor small businesses. . . . . . . . . . . . . . 21

- Tackle the reasons that orce small

businesses to rely on bank nance . . . . . . 24

Section 4: Entrepreneurship and Innovation 25

- Encourage demand or innovationthrough public procurement . . . . . . . . . 26

- An inrastructure or the 21st century . . . . . 27

- An open market or innovation

in the service sector . . . . . . . . . . . . . . 28

- Targeted nance or innovation . . . . . . . . 29

- Support entrepreneurship . . . . . . . . . . . 30

- The right regulatory regime or

economic recovery . . . . . . . . . . . . . . 31

Section 5: Low Carbon Economy 33

- Promote energy eciency. . . . . . . . . . . 34

- Simpliy waste and recycling . . . . . . . . . 36

- Exploit the opportunities provided by a

low-carbon economy . . . . . . . . . . . . . 38

Section 6: Local Communities 39

- Reorm planning . . . . . . . . . . . . . . . . 40

- Curb parking charges . . . . . . . . . . . . . 41

- Make business rates automatic. . . . . . . . 42

- Save our pubs reorm the pub tie . . . . . . 43

- Tackle crimes against business . . . . . . . . 44

- Revolutionise the Post Oce . . . . . . . . . 45

- Simpliy public procurement . . . . . . . . . 46

- Prioritise tourism. . . . . . . . . . . . . . . . 47

Annexes 48


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Maniesto 2010 www.sb.org.uk6


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7

Executive Summary and

Key Recommendations

In order to help small businesses create

employment and tackle unemployment the FSB

proposes reorming the Jobcentre in order to

reconnect the jobseeker with the job providers -

small businesses. The Government should also

introduce an Enterprise Allowance Scheme toencourage individuals to set up in business during

a recession. The Government should also declare

a moratorium on business legislation in order to

prevent businesses rom being deterred rom taking

on more sta.

The UK needs a tax regime geared towards

helping economic recovery in order to encourage

small businesses to increase employment. The

FSB is advocating a cut in payroll taxes through a

reeze in National Insurance contributions and

a national insurance rebate or small businesses

with ewer than 50 members o sta that increase

the number o employees during 2010/2011, to

encourage small rms to grow and take on more

employees.

In order to nance the economic recovery there

is a need to renew the economic stimulus providedto small businesses to help the country along the

road to recovery. Greater competition needs to

be introduced into the banking sector along with

restoring the trust between banks and small

businesses. Alternative orms o nance need to be

developed through the creation o regional nance

houses, and developing the Bank o Essex model

along with Regional Stock Exchanges. There is

also a need to tackle the reasons that orce small

businesses to rely on bank nance, such as late

payments in the supply chain.

In order to encourage entrepreneurship and

innovation to uel the recovery, the FSB proposes

encouraging demand or innovation through

public procurement, inrastructure and the open

market. There is a need to look at more-eective

ways o nancing innovation through the reormo the Enterprise Investment Scheme (EIS) and

supporting entrepreneurship with less money

being spent more wisely on targeted support or

small and micro businesses. An eective regulatory

regime also needs to be set up in order not to deter

greater employment.

There are challenges and opportunities in

addressing current environment legislation and

realising the low-carbon potential o SMEs. There is

a need or tailored advice to or SMEs on energy

eciency and support so that small businesses

can maximise their use o smart metering.

With regard to waste and recycling, a local waste

inrastructure should be put in place that better

meets the needs o local businesse. Improving and

expanding low carbon business support and

incentives would also help small businesses realise

the huge role they have to play in our low-carbonuture.

Putting small businesses at the heart o recovery

in local communities would ensure that both rural

and urban businesses are saeguarded through the

recession and beyond by means o small business

riendly planning systems and parking policies,

small-business rate relie, a response to crimes

against business, post oces as a small-

business hub, public procurement or local jobs

and a tourism strategy or one o the countrys

largest industries.


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Maniesto 2010

Small businesses hold the key to tackling the

unemployment crisis Between 2002 and 2007,

over 84 per cent o new jobs were created by small

businesses3 and, in spite o the recession, 57 per

cent would like to employ in the uture, creating at

least 800,000 new jobs4

Research commissioned by the FSB5 has revealed

that small businesses are more likely than big

businesses to employ young people, the unskilled,

women returning to work and older workers;

in short, those sections o the workorce most

susceptible to long-term unemployment6

The FSB has already pledged to work with the

Government to create thousands o graduate

internships, but much more needs to be done

to help small businesses to retain and recruit

employees Job creation in the small-business

community must be at the heart o a renewed

economic stimulus

84%

8 www.sb.org.uk

Section 1:

Employment

3 http://ec.europa.eu/enterprise/entrepreneurship/crat/sme_per_review/doc_08/spr08_annual_report.pd (Nov 2009)4 FSB Employment Survey (July 2009)5 Small Businesses in the UK: New perspectives on evidence and policy, University o Westminster or FSB (2008)6 In 2009 alone, the number o under-25s claiming Jobseekers Allowance rose by 80 per cent, costing the country 3.4 million per day. Rethinking the recession Report to the

Princes Trust, Proessor Jenny Harrow and Proessor Cathy Pharoah, May 2009

Between 2002 and 2007 over84 per cent o new jobs werecreated by new businesses

- Reorm the Jobcentre

- Overhaul apprenticeships

- Introduce an Enterprise Allowance Scheme

- Introduce short-time working

- Declare a moratorium on business regulation


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9 Employment

Make it easier or

small businesses to recruit

Small businesses are responsible or a disproportionatenumber o job vacancies (they represent 84 per cent oemployers in the UK7) and are more likely to hire the underskilled and long-term unemployed, so it is logical that there

should be a close relationship between small businesses andJobcentre Plus.

However, FSB research reveals that less than 20 per cent osmall businesses use the Jobcentre to recruit7 and its servicesare more oten tailored to the needs o big business. In 2007/8Jobcentre Plus cost 3.36 billion8; the FSB believes smallbusinesses and jobseekers should receive a better service orthis money.

The FSB recommends:

Making Jobcentres about employment,

not just benets:

To drive orward economic growth in the UK, JobcentrePlus, BusinessLink and skills boards need to work

together. This will give Jobcentres a better ocus onbusiness needs.

Introducing a dedicated small-business manager

Large employers that use Jobcentre Plus are allocateda dedicated local manager who works to understandtheir business needs and reer suitable applicants. EveryJobcentre should have a dedicated small-businessmanager who understands the specic needs o a smallbusiness.

A Jobcentre website or the 21st century

Recruitment has moved online and the Jobcentre websiteneeds to catch up. It should oer a working searchunction, it should allow jobseekers to upload CVs, andlter applicants or jobs so that only suitable applicantsapply to employers, and it should be capable o emailingjobseekers when suitable jobs are posted online.

Reorm the Jobcentre

7 Annual Small Business Survey, BIS (2007)8 FSB Employment Survey (July 2009)9 Jobcentre Plus Annual report 2007/08

FSB research reveals that less than20 per cent o small businesses usethe job centre to recruit and servicesare more oten tailored to the needso big business

How do you nd new members o sta?

Inormally (through word o mouth)

Through existing sta

Advertise in local paper

Job Centre

Recruitment agency

Jobs website

Own website

Card/ notice in business

Actively headhunt sta rom other businesses

Advertise in national paper

Internet based networking sites such as acebook or twitter

Other

465%

310%

219%

197%

116%

104%

79%

62%

44%

15%

13%

71%


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Maniesto 2010

123per week

www.sb.org.uk10

Make apprenticeships easier and

more available in small businesses

Sixty-nine per cent10 o apprentices work in businesses withewer than 50 employees but FSB research has revealedthat even more apprenticeships could be created i thesystem were simplied and better promoted.11 The FSBhas welcomed government and opposition support or itsproposals in this area and we will keep campaigning or theirull implementation.

The FSB recommends:

An increase in the minimum wage or apprentices:

rom 95 to 123 per week.12 This would increase theprospect o retaining the services o the apprentice atercompletion o training.

Creation o a Group Apprenticeship

Programme (GAP):

to make it simpler or small businesses to employapprentices by removing the burdens o bureaucracy.The GAP company would employ the apprentice and dealwith matters such as sourcing training and administrativematters such as Employer Compulsory LiabilityInsurance (ECLI).

Establish a designated Micro-and Small-Business

Apprenticeship Fund:

rom the national skills budget, ring-enced or the smallbusinesses that are hardest to reach. This would ensurethat unds are not wasted on larger businesses with pre-existing training plans.

Promote the Apprenticeship Wage Contribution:

95 per cent o businesses are unaware o wagecontributions on oer to train an apprentice.13

Overhaul apprenticeships

10 Labour Workorce Survey (2007)11 Small Businesses: Big Employers, FSB (2009)12 FSB Apprenticeships Survey (August 2008): 82 per cent o FSB members advocated a rise in pay or apprenticeships (question 3) http://www.sb.org.uk/policy/images/

apprenticeships%20survey.pd (November 2009)13 FSB Apprenticeships Survey (August 2008), question 4 http://www.sb.org.uk/policy/images/apprenticeships%20survey.pd (November 2009)

95 per cent o small businesses areunaware o the wage contributions onoer to train an apprentice

the amount we believeapprentices should be paid


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Employment11

Introduce an Enterprise

Allowance Scheme

Promote sel-employment

The UK needs to make sure that sel-employment is a realoption or the unemployed and that businesses created in thenext 12 months fourish and grow. New research indicates that

the recession provides opportunities or new business start-ups, not least or emale entrepreneurs.

Between 1987 and 1994 support was available or theunemployed to set up businesses through either theEnterprise Allowance Scheme or the Business Start-Upscheme. In 1992, over 36,000 businesses were set up underthese schemes and they had a 74 per cent survival rate ater18 months.14 Within this time over 10,000 additional jobs werecreated in these businesses. Many small businesses todayhave their roots in these schemes.

Studies show that new small rms grow at a aster rate than

larger companies, creating more employment opportunitieseven when corrected or their higher probabilities o ailure.15

The FSB recommends:

An Enterprise Allowance in the rst year o business:

- 200pw or 3 months allowance (2,600)

- 100pw or 3 months allowance (1,300)

An Investment Grant: available so new businesses

can bid or money to invest in tools or equipment

Access to targeted support and training

All business plans should be checked or viability

by a business advisor beore the individual receives

an allowance

The claimant should be able to return to their

ull benets ater six months i the business is

not successul

Ongoing support: whether this comes romthe enterprise agency providing the business-planning

support and doing the regular checks or rom a

mentor, such as those provided by the Princes

Trust, it is essential

14 Small Businesses: Big Employers, FSB (2009)15 Does Sel-Employment Reduce Unemployment? Journal o Business Venturing (2008), A Roy Thurik

36,000

the number obusinesses set upunder the enterpriseallowance scheme


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Maniesto 2010 12 www.sb.org.uk

Introduce short-time working

Provide help to keep people

in work and active

A short-time-working subsidy would enable employers toavoid immediate redundancies and retain essential sta andskills. It would save jobs, save on benets payments, andencourage retraining on the job. A similar scheme calledProAct is already working well in Wales.

The FSBs proposal would reduce the personal and socialcosts incurred by long-term unemployment and increaseeconomic demand by limiting the income reductions aced byworkers on short-term hours or temporary lay-os.

Any business that agreed to put an employee into a trainingscheme instead o making them redundant would receive atax cut on their overall employer NIC bill. The cut would beworth 4,500 per employee trained, and would help pay or

the training.

The tax cut would be granted on condition that:

The business can demonstrate that it has a genuine needto reduce the number o labour hours, on the basis oexisting market conditions

The business agrees to switch employees onto short-

time working instead o making them redundant

The employee undertakes training, paid or bythe business

The business is undamentally viable, and is notnear bankruptcy

How it would work:

Private-sector employers who agree to put an employeeinto training and short time working rather than makingthem redundant would receive a credit against theirEmployers National Insurance Contributions

The credit would be worth 4,500 or any ull-timeemployee who is moved on to a combination o trainingand short-time working (between eight and 32 hoursa week)

Part-time employees could also be eligible or thescheme, provided they were working or over eighthours a week

4,500per employee trained


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13 Employment

Declare a moratorium on

business regulation

Make the regulatory environment

more predictable

Job creation is easier in a predictable regulatory environment.In 2008, 57 new or altered regulations were introduced thataected business. 2009 will see an equal number o changesdespite the recession.

To put this into the context o job creation, 60 per cent obusinesses listed regulation as an obstacle to successand or 14 per cent, it was the single biggest obstacle.16The employment law burden is also cited as one o the keyreasons why members downsize, sell or close a business.17The majority o businesses rate employment legislation(eg. legislation elated to maternity/paternity leave, redundancyand grievances) as complex and dicult to deal with.18Equally, businesses have key concerns about employment

legislation when they are contemplating taking on new sta.Businesses also have signicant concerns about vexatiousclaims via employment tribunals.

According to the FSB survey o members,19

businesses biggest problems with regulation are:

The number o dierent regulations and requirements 61 per cent

Keeping up with changes 59 per cent

Uncertainty that you have got it right 53 per cent

Government could massively simpliy the legislativeramework or businesses by just not making any changesor business until the economy recovers. This has beenconsidered by government and opposition parties.

The FSB calls on all political parties to have the courage tobe bold and call a halt to all changes to business regulationor the period o the economic downturn and recovery.In addition, the aim or a 25-per-cent reduction in theregulatory administrative burdens absolutely has to be met orbusinesses to have a chance or growth.

16 Annual Survey o Small Businesses Opinions, BIS (February 2008)17 FSB Membership Survey (2008)18 FSB Employment Survey (July 2009)19 FSB Employment Survey (July 2009)

60%

14%

o business list regulation as anobstacle or job creation;

cite legislation as the

biggest single obstacle


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Section 2:

TaxationThe FSBICM Voice of Small BusinessAnnual

Survey reveals positive early signs or business

investment, growth and employment; these trends

now need to be nurtured with the right tax regime

While it might be tempting or current and uture

governments to see tax increases on business as

a convenient route to reducing the public-sectordecit, research commissioned by the FSB clearly

shows that this could stop any recovery in its tracks

The Centre or Economic and Business Research

(CEBR) report Small-business Tax Increases Do

the Economic Costs Outweigh the Fiscal Gains?,demonstrates the damaging eect that tax

rises would have on employment and business

investment20

Using small business taxation to help reduce the

public sector decit would incur a heavy price

in jobs and economic growth Furthermore, the

negative economic eects o these taxes would

also cause a narrowing o the tax base which would

limit the additional revenue raised In short, taxing

economically benecial activity is inconsistent withencouraging a strong recovery

Conversely, evidence suggests that cutting payroll

taxes would result in business growth and job

creation Small businesses can deliver a strong

economic recovery i they are given the chance to

grow and fourish, but they will need a helping hand

20 Note: this research was carried out beore the Government set new thresholds or the rate relie scheme

Raisingthesmall-businessrateofcorporationtaxfrom21percentto 26 per cent would cost around100,000 jobs and reduce economic output by 4.3 billion. Increasing corporation tax or small businesseswould have a negative impact on business investment and innovation, and ultimately damage employment levels insmall businesses.

Adding1percenttoemployersNationalInsuranceContributionspaid by small and medium-sized enterpriseswould reduce the decit by 6.3 billion over 10 years, but at a cost o 57,000 jobs the simulation suggests thatlabour taxation through raising National Insurance Contributions will make a greater contribution to the Exchequerthan corporation tax increases, but would still be very damaging in respect o its impact on employment.

Reducingthesmall-businessratereliefthresholdby5,000would cost around 4,300 jobs in small businesses,but would only reduce the public sector decit by only 0.6 billion over 10 years the simulation suggeststhat such a change would have only a marginal eect on public nances, whilst costing jobs and output withinsmall businesses.

- Cut payroll taxes

- Support sel-employment through the tax system

- Tackle Value Added Tax

- Cut VAT to 5 per cent or all construction work

- Reorm pension proposals


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15 Taxation

21 FSB Employment Survey (July 2009)22 Survey o 4000 FSB members in August 2009

Cut payroll taxes

Give small businesses the help they

need to take on more sta

A renewed and targeted scal stimulus needs to be closelylinked to employment. A recent survey o FSB membersrevealed that 44 per cent elt that a cut in payroll taxes wouldhelp them take on more sta.21

The FSB recommends:

Introduce a National Insurance rebate or new jobs in

small businesses

We already know that hal o small businesses wantto invest and expand in the next 6 months.22 Smallbusinesses with ewer than 50 members o sta that createa new job during 2010/2011 should receive a nationalinsurance rebate on any new sta.

Freeze Employers National Insurance

Contributions (NICs)

Employers National Insurance (NICs) is a tax onemployment. As the CEBR report demonstrates, anincrease in Employers NICS would have a very detrimentaleect on job creation, with unemployment reaching a

record high. The FSB urges the Government not go aheadwith any planned increase to NICS in 2011.

Repeal Class 4 National Insurance Contributions

The FSB calls or a repeal o Class 4 National Insurance,which it rmly believes is just another orm o taxationon the sel-employed and thereore counterproductive topromoting entrepreneurship.

44% o FSB members elt that a cut inpayroll taxes would help them takeon more sta


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Support sel employment

through the tax system

Tackle Value Added Tax

Sel-employment encourages

innovation and economic growth.

The FSB believes that the Government should be supportingthe sel-employed through the tax system and encouragingthe unemployed who want to become sel-employed throughan enterprise allowance scheme.

It is vital that plans to change the denitions o sel-employment in construction and training industries arestopped. These changes will be damaging to these sectorsand the FSB ears wider application o new denitionsthreatening the sel employed. We believe it is time to reviewIR35 legislation and ensure that this is not penalising thegenuinely sel-employed.

Get VAT right or the recovery

The FSB is very concerned that the 1 January date or the

VAT change is very badly timed rom a business point o view.It comes right in the middle o the busiest period or retailbusinesses, which have the biggest administrative burden inmaking the changes. In customer-acing businesses thesechanges have to be made directly ater Christmas when theremay be ewer sta owing to holidays. We believe that thischange should be put back to February to provide businesseswith a longer lead-in time.

The FSB would oppose any move to increase VAT to 20per cent. We are concerned about the potential impact o adouble VAT increase on businesses in 2010. Businesses areplanning or the change in January. I they go through this

process again later in the year, the cost to businesses in time,administration and resources involved in changing pricing,catalogues and other on-going costs reaches 350 million.23

Reducing VAT rom 17.5 per cent (15 per cent untilJanuary 2010) to 5 per cent or all maintenance and homeimprovement work would benet millions o UK homeownersby getting rid o cowboy builders, helping those who cannotaord vital repairs to their homes, bringing empty propertiesback into use and protecting the countryside.24

The current situation in which new build attracts a lowerVAT rate than renovation or brown-site development does

not make sense in the current economic climate and inview o the challenges to make private homes moreenvironmentally riendly.

The FSB recommends:

Putting back the date or the VAT rise in2010 to February

Making sure there is only one VAT rise in 2010

Cut VAT to 5 per cent or all construction work

23 http://www.hm-treasury.gov.uk/d/pbr08_vat_1845.pd (Nov 2009)24 Cut the VAT campaign: http://www.cutthevat.co.uk (Nov 2009)

350 millionthe cost to business o a change to VAT


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17 Taxation

Reorm pension proposals

Dont allow pensions reorm to become

a tax on jobs

The FSB recognises that there is currently a crisis with regardto pensions saving in the UK, with over 6 million peopleailing to save enough or retirement. However, the systemproposed by the Department or Work and Pensions (DWP)is bureaucratic and dicult to introduce and risks alling oulo the same mistakes as the 1999 pension reorms. DWPsproposal would hold businesses back rom growing andtaking on more sta.

The FSBs approach would give businesses a longer lead-in time to register and see automatic pension saving oremployees introduced sooner. It would save the Governmentmoney and businesses administrative hassle.

The FSB recommends:

Automatically enrolling all small businesses into

personal accounts giving them time to choose to opt

out and nd alternative provision

Pushing back implementation until 2014: make

businesses aware o their pensions obligations rom

2012, with all businesses to be enrolled with a pension

by 2014

All existing employees to be registered with the

pension scheme and given pensions inormation at

least one month beore the implementation date

When accounts go live, they have two months to opt

out o the scheme. During the opt-out period no money

has to leave the employer in order to minimise reunds


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Section 3:

FinanceWhen the banking system collapsed in 2008 the

FSB was quick to respond, advocating a 1 billion

loan guarantee scheme, which was subsequently

adopted as the Enterprise Finance Guarantee This

and other emergency measures have helped stem

the fow o insolvencies but we should not be lulled

into a alse sense o security, as much bigger andlonger-term structural problems remain

Credit conditions remain dicult or many small

businesses A worryingly large number are still being

reused unding and a quarter o FSB members have

seen their credit increase in price rom 6 to over 15

per cent25 There might plausibly be enough nance

in the system to sustain businesses in the depths

o a recession, but there is no sign o the levels o

nance that will be required to lit us out

As experience rom previous recessions shows,demand or credit is at its highest during the

recovery stage, but it is ar rom certain that the UK

has the necessary nancing structures to support a

recovery26 Without these in place the positive signs

spotted in the FSBICM survey could all fat, leaving

the recovering patient to slip back into a coma

This leads the FSB to the

ollowing conclusions:

1. Aspects o the economic stimulus must not be cut until

the banking system is xed2. Greater competition in the banking sector

is a priority

3. Dialogue and trust must be restored between

banks and small businesses must be restored

4. The UK must develop alternative orms o nance

or small businesses

5. We need a concerted attack on the negative actors

that orce businesses to seek nance

25 FSB Credit Crunch snap polls 2008-2009: See Appendix.26 Adam Posen Speech, Monetary Policy Committee: http://www.bankoengland.co.uk/publications/news/2009/080.htm (Nov 2009)

- A renewed and targeted economic stimulus- Bring greater competition to the banking sector

- Restore trust between banks and small businesses

- Develop alternative orms o nance or small businesses

- Tackle the reasons that orce small businesses to relyon bank nance


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Finance19

A renewed and targeted

economic stimulus

Keep the EFG in place and diversiy

points o access

It is clear that the nancial sector will not be in a position tosupport economic recovery anytime soon. Furthermore, theGovernments economic stimulus is due to end in March 2010when the EFG is wound up.

I we project the ndings o the recent FSB-ICM survey intothe early part o next year, there is good reason to suggestthat economic growth will demand increasing levels o nancejust at the time it is being withdrawn.

For this reason it is absolutely essential that the EFG is

extended beyond March 2010 and that this channel o undingis replenished and made more readily available. This wouldbe a logical and, since there have been ew deaults on EFGloans, a sae step towards renancing the economy.

The FSB recommends: Extending the Enterprise Finance Guarantee to make

it a permanent source o nance and replenishing the

und when required

Diversiy the points o access or EFG, allowing

the scheme to be delivered through Regional

Development Agencies, local authorities and

small aggregate lenders

Create a single web portal, backed up by a universal

credit rating database, where businesses can apply or

EFG and other nancial services

Ring-ence hal o the 8 billion und released or

mortgage lending through Northern Rock or small-

business lending

Sources o Finance

Existing Sources

Banks Own savings

Business Angels

Venture Capital

Private Investor

Enterprise

Finance

Guarentee

Retained Prots

Small Business

Regional

Government

Finance House

Small Business Small Business

European

Investments

Bank

New Banks

Post Bank

Regional

Stock

Exchange

New Sources

Source: FSB Barriers to Growth 2008


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Maniesto 2010 20

Bring greater competition

to the banking sector

Give us a banking inrastructure that

can support economic recovery

The lack o competition in the banking sector was a concernor small businesses long beore the credit crunch. As longago as 2000, the Cruickshank Report27 ound that the ourmain banks, Barclays, HSBC, Lloyds TSB and the Royal Banko Scotland (including National Westminster), had an 83 percent share o the SME banking market.

The banking crisis has only served to exacerbate this problem.Government bailouts, capitalisation schemes and takeovershave urther reduced the choice o banking services or smallbusinesses. With 24 per cent o small businesses seeing an8-per-cent rise in the cost o nance, only greater choice andcompetition will put the necessary downward pressure on thecost o and access to nance.

To put this into perspective, there are only 170 bank branchesper million people in the UK, compared to 520 in Germanyand 960 in France. The UK simply does not have the bankinginrastructure required to support recovery.28

So the FSB welcomes the Governments announcementthat it will create three new banks and its commitment toestablishing a Post Bank, a proposal initially developed andpromoted by the FSB.29 We now need current and uturegovernments to deliver on this promise.

The FSB recommends:

Making Post Bank a reality

The FSB believes that a Post Bank will oer bankingservices that are: local; non-shareholder-driven; innovativeand, above all, trusted.

There are various models or delivering a Post Bank,including turning Northern Rock into the Post Bank, using

the Mutual Trust/Trustee Saving Bank model, or acquiringBank o Ireland. These options give decision makers thechoice o keeping a Post Bank in public ownership,or turning it over to the private sector through themutual model.

Making better use o existing state held banks

Part o the reormation o Northern Rock should includea much greater ocus on small-business banking. Thisshould start immediately with hal o the 8 billion undreleased or mortgage lending ring-enced or small-business lending. This would introduce more choice and

competition immediately into the marketplace.

27 http://www.hm-treasury.gov.uk/press_98_00.htm (Nov 2009)28 The Turner Review (2009)29 The Case or a Post Bank, Post Bank Coalition (2009)

there are only170 bank branchesper million people in the UK,

compared to520 in Germany and960 in France

www.sb.org.uk


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Finance21

Restore trust between banks and

small businesses

Promote and embolden the Financial

Intermediary Service

The uture health o our economy depends on restoring thetrust o small businesses in the banks. Turning ideas andinnovation into business growth requires a reliable nancialpartner. The recent crisis and the preceding years o bankrestructuring mean that this trust no longer exists between thebanks and small business.

For this reason, the FSB proposed the creation o a FinancialIntermediary to serve as a go-between or viable businessesbeing reused nance. With knowledge o the local economyand contacts with local branch managers, the FinancialIntermediary can advise businesses that are having dicultyaccessing nance and, where possible, broker agreementswith banks on lending decisions.

The FSB was very pleased when the Government adoptedits proposals and established Financial Intermediaries in everyBusiness Link oce in England. The service has alreadydemonstrated its worth, but it has still to realise itsull potential.

The FSB recommends:

The Financial Intermediary Service must be eectively

promoted so that more small businesses know about

the scheme

Financial Intermediaries should be given real teeth

to report banks that are ailing to lend adequately to

viable small businesses

Financial Intermediaries should report on how thebanks are perorming when small businesses are

considering and switching between banks; a maximum

o ve working days would be enorced or switching

to help improve choice and increase the competition

30 http://www.nap.co.uk (Nov 2009)

Develop alternative orms o

nance or small businesses

Open up new routes to nanceIt is increasingly clear that the UKs economic recovery ishostage to bank restructuring. One o the reasons we ndourselves in this calamitous state, to a much greater extentthan any other Western economy, is the limited availability onon-banking nance or small businesses. This situation isnothing new, but the economic crisis has thrown this structuralweakness into stark relie.

Pension unds invest a large amount o money into thestock market to develop and increase pension yields ortheir members. Pension schemes alone contain assets o

around 800 billion, which could be invested into regionalstock markets as the FSB is proposing. This would giveadded competition in equity based nance markets or smallbusinesses and allow pension und managers to diversiy risk.

Small businesses remain an attractive proposition or investorsand FSBICM data suggests that this is only going to improve.Thereore, the FSB is proposing a series o measures thatwould open up new routes to nance.

The FSB would like to see many more orms o capitalentering the small-business credit market. Venture capitalunds, or equity release schemes, delivered throughproessional und managers and unded by Government,should be a priority i we are to properly nance the recovery.


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Maniesto 2010 22

Turn Regional Development

Agencies (RDAs) into regional

nance houses

Channel EIB money through the RDAs

RDAs should evolve into regional nance houses bothproviding nance to businesses through term loans and alsomanaging equity schemes or smaller businesses.

The FSB welcomes the Governments and the European

Investment Banks (EIB) attempts to drive unds towards smallbusinesses. O the 12 billion brought orward by the EIB,the FSB expects that 4 billion will be allocated to the UK. Itis noted that the Government is moving in the right directionand aspires to help small businesses in accessing EIB nance;however, this decision still rests with the banks.

The FSB recommends:

The RDAs access EIB unds, which they then ring-

ence or small businesses

That the criteria or small businesses to borrow money

ollow the EIBs set criteria31

The RDAs should be expected to collect money rom

loan applicants and be responsible or promoting the

scheme, receiving applications, deciding viability and

acting as a point o contact or queries

31 http://www.eib.org/about/news/eib-loan-or-smes.htm (Nov 2009)32 http://www.essexbusinesssupport.com/news-events/banking-on-essex-launches (Nov 2009)

Encourage wider use o the

Bank o Essex model

Re-establish municipal lendingEssex County Council has gone into partnership with AbbeyCorporate Banking to make an initial 30 million available tosmall businesses in the county.32 This money will be used orbusinesses that employ ewer than 250 employees, whichhave been trading or more than 12 months and which have aturnover o less than 25 million.

This is the rst municipal lending scheme since 1915, andthe FSB welcomes such moves rom local authorities. Thisexample should be promoted and ollowed by others.

The FSB recommends: All local authorities should be made aware o the

scheme and the benets it will have or small

businesses and the long-term sustainability o an area

Government should guarantee 50 per cent o all

bad debts or local authorities taking part in such a

partnership scheme. This would give local authorities

an incentive to explore such mechanisms and would

attract nancial institutions to take part

www.sb.org.uk


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Leverage local money or local

businesses

The virtual monopolisation o the equity nance market bythe London Stock Exchange and the AIMS market is a airlyrecent phenomenon. Until the 1970s regional stock exchangesexisted up and down the UK, with exchanges in Bristol,

Cardi, Haliax, Sheeld and Swansea. At their height, therewere 22 regional stock exchanges across the UK.

While the internet age has made stock exchanges oot-loose,the FSB believes there are strong arguments or re-introducingregional exchanges, which could leverage locally held moneyor local businesses. In act, this is already happening with theWest Midlands based Investbx.33

The FSB believes that regional stock exchanges couldhelp small businesses raise equity nance o up to 2m byintroducing them to a wide investor base. Research providerscould be commissioned to produce independent inormationon behal o the company, made readily available to investors.

Subsequently, shares in the company could be traded on apublic platorm, to encourage liquidity and acilitate an exitroute or investors.

The FSB recommends:

Each Regional Development Agency should be

mandated to allocate 3 million to set up an online

platorm or the exchange o shares or equity in small

and medium sized businesses

Finance23

Re-establish Regional

Stock Exchanges

33 Investbx is regulated by the Financial Services Authority (FSA) and listed companies will meet a set o regulatory and disclosure requirements. The scheme also passed EuropeanCommission state aid rules, allowing Advantage West Midlands to start the initiative with an initial outlay o 3million.

I would like the Post Oce to become a bank in its own right

and to uphold the old traditional banking ethos and not tospeculate with peoples money Its time to compete against themain banks by dierentiating its services to business customers

FSB member


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Maniesto 2010 24

Tackle the reasons that orce

small businesses to rely on

bank nance

Addressing late payments

While the private sector is the main concern or most smallbusinesses, local authorities and other regional agencies haveso ar ailed to heed the Governments demand to pay within10 days. The FSB argues that all local authorities should beorced to come into line with government departments andpay within 10 days, or ace a ne.

Many small businesses are orced to rely on overdrats andbank loans because they are not paid on time. One in threesmall rms is now waiting longer to be paid by debtors sincethe onset o the credit crunch. This has led directly to theclosure o 4,000 rms in 2008/09.34 Small businesses are

owed more than 10bn by suppliers or customers ailing topay within the standard 30-day invoice period, an increase o1.7bn on last year.

The FSB recommends:

Fully implement the Companies Act o 1985

Publicly name, shame and ne companies reneging on

the payment terms registered with Companies House

Empower Companies House to become a proper

enorcement body. Since 1985, companies have

been obliged to submit their payment terms to

Companies House. However, this has not been ully

enorced and Companies House lacks the resources to

ull its role

The Late Payment Directive which does not currentlycover payment to subcontractors, should include a

social clause. This clause would stipulate that i a

larger business is paid within 30 days by a public body,

they are obliged to pay their sub-contractors also

within 30 days

34 Getting paid on time, BIS (Oct 2009)

4,000the number o rmsclosed due to latepayments in 2008/9

Small businesses were owed more than 10bn by suppliers or customers ailing topay within the 30-day invoice period in 2008/09

www.sb.org.uk


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25 Entrepreneurship and Innovation

Section 4:

Entrepreneurshipand InnovationDespite the problems posed by the economiccrisis, the FSBICM Voice of Small BusinessAnnual Survey reveals that small businessesremain innovative and entrepreneurial Over hal(53 per cent) o small businesses have continued tointroduce new or improved products or services inthe last 12 months A similar number (51 per cent)intend to introduce new products and services in thenext 12 months The challenges and opportunitiesposed by the recession might even have sharpenedthese instincts

While small rms show every sign o beinginnovative and entrepreneurial, the UK Governmenthas not been particularly good at providing theright conditions or this to truly fourish In act, theFSB contends that both UK and EU attempts toencourage innovation have allen short as there islittle understanding o the true nature o innovation

Innovation what is it and how do wecapture it?

For too long, innovation policy has been basedon increasing the percentage o GDP spent onResearch and Development (R&D), instead oon supporting the broader base o incrementalinnovation, which is more important to the overalleconomy, but too oten goes unseen

It has been recognised that innovation, thedevelopment or improvement o new products,processes or services, will play a key part in theUKs economic recovery Small businesses areused to working in a fexible way, adapting to their

customers and suppliers through networks, andinnovating as a result

The FSB wants to see a signicant reorientation inthe ocus o innovation policy, away rom ocusingpurely on inputs into a small number o high-techrms towards a structure that will support andpromote a broader denition o innovation thatexists in the wider economy

- Encourage demand or innovationthrough public procurement

- An inrastructure or the 21st century

- An open market or innovation in the service sector

- Targeted nance or innovation

- Support entrepreneurship

- The right regulatory regime or economic recovery


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Encourage demand or innovation

through public procurement

Use public procurement to nurture

innovation in small businesses

The public sector purchases a large volume o goods andservices and has the potential to drive innovation throughprocurement. Government is responsible or 55 per cent oall purchases o IT and medical equipment and its overallprocurement budget is worth 175 billion per annum, but it

has received considerable criticism or ailing to use this todrive innovation.35

The FSB believes that current and uture governments need toturn public procurement into the key driver or innovation.

The FSB recommends:

A UK equivalent o the Small Business Innovation

Research Programme

The UK should adopt the United States Small BusinessInnovation Research Programme (SBIR) model. With abudget o $2billion, SBIR inorms small businesses o its

purchasing needs and timetable, creating demand andmarkets or new products and services to be met bysmall businesses.

Government should commit an initial 100 million tound purchasing.36 It should be ring-enced or the small-business community, promoted twice a year to ensureuptake and should be accompanied by an audit o alldepartments and public sector agencies or their uturetechnology and service needs.

35 http://www.cbr.cam.ac.uk/pd/SBIR%20Full%20Report.pd (Nov 2009)36 http://www.bl.uk/bipc/pds/richardreport2008.pd (Nov 2009)

16%the total value opublic contracts goingto small businessesDTI 2002


27/52

27 Entrepreneurship and Innovation

An inrastructure or

the 21st century

Fast broadband is no longer an optional

extra, it is a necessity

The emergence o the internet and the potential this holdsor online trading is hugely exciting or the small-businesscommunity. The low set-up costs and the instant access tothe global marketplace make this revolution particularly suitedto small businesses, especially in rural areas. This will also bethe rst economic recession in the internet age, and the FSB

believes that giving businesses greater online opportunitieswould really boost economic recovery.

Online trading should be a stimulus or innovation andentrepreneurial endeavour, but ndings rom a recent FSBsurvey37 reveal that small businesses are still being let downby poor inrastructure:

Aroundhalfndineffectivebroadband interrupts basicuse o email

Thirtypercentareunable

to purchase online Nearlyone-thirdareunableto

process payments owing to lacko speed and reliability

Almosttwoinverespondentsavoid online conerencing,webcasts and podcasts owingto slow broadband speeds

Twenty-ninepercentofsmallbusinesses currently receive

less than 2Mbps Thelackofbroadbandspeed

reduces productivity or a thirdo businesses

When we asked small businesses what they most needed togrow online in this new market space, 60 per cent said theyneeded a minimum download speed o 8 Mbps, or all users.38

The FSB recommends:

Service providers must guarantee minimum upload

and download speeds

Policy makers must enorce regular review and

increase o these minimum speeds to enable the UK

to be a real competitor

Diversication o the market place to encourage

stronger competition, alternatives to established

providers and greater customer choice

Wider use o bre-optic cables, particularly targeting

not-spot areas, and the development o more

innovative solutions to enable access to high-speed

broadband in all areas o the UK

37 FSB Broadband survey (2009)38 FSB Broadband survey (2009)

60%o small businesses saidthey need a minimumdownload speed o8 Mbps


28/52


An open market or innovation in

the service sector

The best way to drive innovation

is to create demand

Over the years the Single Market has provided new customers

or businesses, driving job creation and economic growth.Today the Single Market is worth 20 billion39 to the UKeconomy, but it could be worth a lot more.40

For the last ve years, the FSB has led the way incampaigning or a Single Market or services,41 a sectordominated by small businesses and ripe or innovationand growth. A Single Market in services will create newopportunities and new jobs and grow the UK economy byan estimated 6 billion per year. It will also massively cutred-tape.

In what has been one o the largest de-regulation exercises inrecent years, the FSB has worked with the Government and

the European Commission to identiy and remove the barriersto trade in services across the EU. The Services Directive willcome into orce by the end o 2009 and will open the door to awealth o opportunities or small businesses across the UK.

The FSB recommends:

Government must rigorously promote the Single

Points o Contact that will serve as the gateway to new

markets or small businesses

The Single Points o Contact must run as smoothly as

possible, including the processing o applications by

local authorities and other bodies

39 Business or New Europe quoted in the House o Lords Select Committee on the European Union fth report on the EU (2008)40 The services industry accounts or 70 per cent o GDP in the EU and or 69 per cent o employment, but intra-EU trade in services only accounts or 20 per cent, Eurostat, (2008).41 Ater leading the business lobbying campaign or the Services Directive in Brussels, the FSB was appointed to the UK Governments steering panel tasked with implementing

the Directive.

20 billionToday the Single Market isworth 20 billion to the UKeconomy, but it could beworth a lot more


29/52

Entrepreneurship and Innovation29

Targeted nance or innovation

Increase support to small businesseswanting to innovate

Generating greater demand and a more predictableenvironment or innovation is only one side o the coin. Smallbusinesses also require more sophisticated nancial supportor developing new products and services, particularly sincethe credit crunch.

The FSB recommends: Reorm the Enterprise Investment Scheme (EIS)

The EIS needs to be reormed to allow rms to apply orterm loans as well as equity. As the EIS is tailored to andtaken up by smaller high-risk businesses that would beshort o security, a reorm would allow innovative smallbusinesses to access both types o nance. This wouldallow choice and help high-risk rms continue to innovateand create jobs.

Terms loans are the norm in most small business nancing

packages and this would allow investors to oer bridgingnance and top-up loans to businesses whose expansionplans or research and development needs additionalnance. This type o investment is already conventional inthe venture capital/equity community.

Better nancial support or green innovation

Small businesses demonstrate a strong commitmentto cutting the costs associated with carbon emissions.However, purchasing newer energy-ecient equipmentis beyond the reach o many small businesses in thedownturn. Government should broaden out the CarbonTrusts und or business and oer loans to purchase orhire new technologies as they come orward.42

42 The Carbon Trust oers loans o up to 400,000 to businesses investing in greener technologies.

10 12 billion is spent every year on governmentunded business support Only 5 per cent othis goes to the micro business sector, whichaccounts or 95 per cent o all business and thelions share o innovation and job creation


30/52


Support entrepreneurship

Getting more support or less money

It is estimated that 10-12 billion are spent every year ongovernment-unded business support.43 However, only 5 percent o this goes to the micro-business sector, which accountsor 95 per cent o all businesses together with the lions shareo innovation and job creation.44 I Government is seeking tosupport the drivers o economic growth, it is currently missingits target and wasting a lot o money in the process.

The FSB would like to see less money spent more wisely on

targeted support.

The FSB recommends:

More support or less money

Over 1 billion is designated or Train to Gain and SectorSkills Councils (SSC), yet 90 per cent o small businessesdo not know which SSC relates to their business45 and88 per cent had not taken up an oer o training throughTrain to Gain in the last six months.46 Over 2 billion o

unding is designated or Regional Development Agencies,which includes spending on Business Link, but businessessurveyed say it is o little or no use.47

The FSB strongly believes that Business Link and otherelements o the support structure have important rolesto play. However, the current business support budgetshould be cut, streamlined and dedicated to small andmicro-businesses that are most in need o support, ratherthan subsidising medium and large businesses. Duringthese dicult economic conditions we must apply goodbusiness sense to business support and get better serviceor less money.

Focus unding on gaps in the market

Research consistently shows that business owners placemore value on paid or support than on ree Governmentsupport, not least because a paid-or service is morelikely to be tailored to specic business needs. Thereore,Government should und the provision o business supportonly where there is no private-sector provision available.This would save money and ocus resources on gaps inexisting business support.

Move more business support online

The FSBs survey work (see Table 1) has revealed thatgovernment-unded training in areas such as operationsand eciency, product development and sales andmarketing development are o little interest comparedto straightorward business advice oered through theinternet.48 As in all other walks o lie, the internet is nowthe go-to source o inormation and advice or smallbusinesses.

A well-promoted, truly impartial web portal or businesssupport should signpost small businesses to governmentand private sources o business support, where possibleoering at least two business support options. The online

service should also include a question-and-answer service,providing on- the-spot diagnosis or oering a callbackservice rom a broker with the relevant expertise.

Focus resources on advice brokerage and mentoring

I business support were targeted at small and micro-businesses, instead o subsidising larger rms with theresources to buy in advice, money would be available or amore comprehensive brokerage service.

Small businesses seeking advice would benet rom agreater number o competent advisors with experience orunning successul businesses as owners and managers.In the areas o both business brokerage and mentoring,the FSB would like to see business advice coming romindividuals with real-lie experience o business.

43 Small Business and Government: The Richard Report (2008)44 SEDI, http://www.sedi.co.uk/sedi-news/six-killer-acts (Nov 2009)45 FSB Research into Sector Skills Councils (May 2009)46 FSB Research into Train to Gain (May 2009)47 Putting the UK Economy Back on Track: Business Support and Finance, FSB (2008)48 Putting the UK Economy Back on Track: Business Support and Finance, FSB (2008)

Government- unded

business support

Internet

Starting up

Access to nance

Management, recruitment, people development

Operations and eciency

Product development

Sales and marketing development

14%

57%

60%

48%

30%

69%

30%

53%

99%

163%

148%

341%

Table 1:

Usefulness of providing advice from

2008-2010 (UK)


31/52

Entrepreneurship and Innovation31

The Right Regulatory Regime

or Economic Recovery

Simpliy the regulatory inrastructure

Red tape stifes innovation and entrepreneurship.A moratorium on business regulation should orm a centralplank in a renewed economic stimulus, which, as well ashelping nance growth and jobs, needs to promote a period ostability. We also need more time or recent better regulationmeasures to be elt by the business community.49

We welcome the announcement that 1.4 billion inadministrative costs and 5 billion on the wider costs

o regulation will be cut over the next ve years.50

TheGovernment needs to guarantee that this will happen.The FSB recognises the role it needs to play in advisingwhere these cuts need to occur. However, this shouldbe accompanied by a rationalisation o the regulatoryinrastructure.

The FSB recommends:

Regulators and regulatory budgets- A review o all regulators should ensure they deliver

value or money and make a positive impact on theinspection environment. Where they do not theyshould be merged or scrapped to streamline thesystem. This review should be done via a sunsetclause imposed on the regulators

- Regulatory budgets should be introduced to coverall the costs o new regulation with an impact onbusiness and to begin cutting the existing stock.Creating a regulatory environment that encouragesinnovation and enterprise should be a key targetor the Government

Impact assessments- The National Audit Oce should ensure that

each government department undertakes impactassessments to a set and accepted standard

- Post-implementation reviews should be compulsory

on all legislation aecting business and departmentsshould be publically named when this is not done.A halt should be put on any subsequent legislationuntil the department complies

Common Commencement Dates CCDs- CCDs should be compulsory or all legislation to be

implemented (apart rom emergency legislation) andshould happen only once a (year). All new legislationshould be published at least two months in advanceon the BusinessLink website, including a shortsummary o whom it aects

49 The National Audit Ofce (NAO) notes that the 1.9 billion o savings reported through the UK admin reduction scheme have so ar not been elt by business in a signifcant way50 The Governments Forward Programme, HM Government (2009)


32/52


Compulsory surveys- Government departments and agencies should

share more inormation on compulsory surveys toavoid administrative overload on small businesses

- Small businesses should have fexibility o responseand the option o submitting written inormation inan existing ormat, rather than lling in a new ormwhich asks or similar inormation but will take upmore time

- The Osmotherly Agreement (whereby businesses

with ewer than nine employees get a three-yearholiday rom surveys on completion o an ONSsurvey) should be compulsory or all governmentdepartments

A new role or the Local BetterRegulation Oce (LBRO)

- The LBRO should ensure that all routine inspectionsare booked in advance, so that a business is ableto prepare

- The LBRO should work with local-authority

inspectors to ensure that businesses experienceonly two or ewer inspections each year

- The FSB believes that the remit o the LBRO shouldbe extended to as many local-authority inspectionareas as possible to ensure that the BetterRegulation agenda reaches all regulators

- The LBRO should have greater powers to ensurethat local authorities adhere to the HamptonPrinciples, and recourse powers when they do not

Better regulation and the EU- The European Commission should guarantee the

target o a 25-per-cent reduction in administrativeburden and ensure that it is a net reduction and notbe erased by new legislation

- Any EU document with potential legislativeimpact that has not had a ull small-businessimpact assessment, reviewed at each stage othe legislative process, should be sent back to theprevious stage

- The Government should radically overhaul theEU scrutiny process in the Committees o theCommons and the Lords to make it more relevant

Creating a regulatory environment that encouragesinnovation and enterprise should be a key targetor the Government


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Low Carbon Economy33

Section 5:

Low CarbonEconomy

51 FSB-ICM Voice o Small Business Annual Survey, FSB (2009)

The majority o businesses (57%) have changed theway they operate because o concerns relating toclimate change

Small businesses want to play their part in

helping to protect our environment The FSBICM

Voice of Small Business Annual Survey showsthat businesses are actively engaged in waste-

minimisation and recycling practices The majority

o businesses (57 per cent) have changed the

way their business operates because o concerns

relating to climate change, the biggest change being

the recycling o waste (47 per cent) ollowed by a

reduction in energy use (32 per cent)51

In addition, around a quarter have reduced the

amount o landll (25 per cent), bought energy-

ecient appliances (24 per cent) and raisedawareness o waste with sta (23 per cent)

However, all too oten they are aced with ill-

thought-out regulation that places administrative

burdens on small businesses and also, in some

cases, stops them rom going green

- Promote energy eciency

- Simpliy waste and recycling

- Exploit the opportunities provided bya low-carbon economy


34/52


Promote energy eciency

Make it easier or small businesses to

be energy ecient

Small businesses account or 50 per cent o the UKs totalbusiness energy usage; at a cost o 6bn.52 However theenergy market does not serve their interests and energysaving measures have ailed to engage this important sector.

Small businesses behave in a similar way to domesticenergy users, but do not enjoy the regulatory saeguards thatdomestic users receive. They lack the expertise to negotiatecontracts and nd themselves penalized by suppliers due totheir limited purchasing power and low energy consumption.A survey o FSB members in 2008 highlighted the keyproblems:53

Inaccurate meter reading 21%

Billing problems 46%

Poor customer service 9%

Difculty switching suppliers 24%

The problems aced by small businesses in the energy markethave been addressed in part by their recent inclusion in thegas and electricity redress schemes and OFGEMs EnergySupply Probe. However, we consider that it will take sometime beore the energy market changes and small businessesare treated airly.

The FSB recommends: Eliminating the possibility or contracts to be rolled

over automatically by energy suppliers to stop smallbusinesses being locked into uncompetitive energy

contracts

Introduce a 14-day cooling-o period, such as that

enjoyed by domestic consumers, or small businesses

ater agreeing to a new energy contract

An annual review o how recommendations contained

in OFGEMs Energy Supply Probe are working

Energy eciency

The absence o clear advice on energy eciency hasprevented many rom taking steps to improve energyeciency. For 40 per cent o businesses the lack oguidance stopped them rom adopting more energyecient practices54. Also, technical problems and the costo changing production processes serve as barriers toincreasing eciency.

- The Carbon Trust should provide a dedicated small-business advice team which gives tailored advice tothe small business community on increasing energyeciency.

52 http://www.carbontrust.co.uk/NR/rdonlyres/6545F676-53D3-4FBA-A2F2-585953C6A9EE/0/Energy_Management_launch_event_13Oct05_FINAL.pd (Nov 2009)53 FSB Snap Poll on energy (June 2008)54 Social and Environmental Responsibility and the Small Business Owner, FSB (2007)

Inaccurate meter reading

Billing problems

Poor customer service

Diculty switching suppliers

Key problems faced by small businesses

21%

46%

9%

24%


35/52

Low Carbon Economy35

Smart metering

The roll out o smart metering has the potential to increaseenergy savings or small businesses. The savings and

eciency gains provided by smart/advanced meters willbe marginal compared to the savings enjoyed by energysuppliers unless comprehensive tailored advice is availableto small businesses.

- A dedicated small-business advice service should beprovided to help maximise the potential cost savingsrom the smart/advanced meter roll-out

- The cost o the meter roll out should be met by theenergy suppliers or through the Climate Change Levy

- A mandatory meter roll-out should only happen aterextensive consultation with small businesses and once

installed, it should be possible to access real-timeinormation on their energy use, via the internet.

Micro-energy production & eed-in taris

Despite the challenges, small businesses could playa pivotal role in the ght against climate change byembracing micro-energy production. However, the lack ofexibility in the planning system and uncertainty over eed-in taris are stunting the growth o this new market in theUK.

- Recommendations removing the need or planningapplications or small scale micro-renewable technologyshould be extended to the small-business community55

- A competitive rate should be set or excess micro-energyproduction to eed into the national grid to encouragethe take-up o micro-energy production among smallbusinesses. Guaranteeing a competitive price or eed-intaris will remove the uncertainty or those considering

investing in small-scale low-carbon generationtechnologies, reduce the payback period and increasethe rewards or embracing renewable energy

55 This was recommended by the Governments Householder Development Consents Review Steering Group

32%o rms have reducedtheir energy usage


36/52

Maniesto 2010

Improve access to wasteand recycling acilities

The scale o waste dealt with by most small businesses issimilar to that o a domestic household, but environmentallegislation continues to apply a one-size-ts-all approach,which presents many barriers or small businesses in theireorts to be environmentally responsible.

The FSB recommends:

Waste and recycling acilities

Businesses producing small quantities o waste are otenunable to take advantage o the economies o scaleavailable through waste contracts and recycling servicesare rarely appropriate i the quantities o waste materialinvolved are small.

- Local waste inrastructure suitable or small businesses,such as civic amenity sites, should be made availableto them, or appropriate alternatives such as bring-back schemes should be developed. This would allowbusinesses to manage rising costs while playing a moreactive role in responsible waste disposal

Duty o Care or waste

Duty o Care was implemented under the EnvironmentalProtection (Duty o Care) Regulations 1991 (as amended).It requires businesses to be responsible or the handling,disposal or recovery o waste produced, even when it hasbeen sent to another party, such as a waste contractor orskip-hire business.

- An awareness raising campaign aimed at the small-business sector to heighten understanding o theresponsibilities under the Duty o Care legislation

- There should be a review o the need or Waste TranserNotes or small businesses that produce low volumes owaste. Waste Transer Notes place a large administrativeburden on small businesses and the amount o timeinvolved is oten disproportionate to the risk involved. Byreducing the amount o administration, small businesseswill be encouraged to act more responsibly when itcomes to the disposal o their waste and this will helpreduce the risk o fy tipping

36 www.sb.org.uk

Simpliy waste and recycling

47%o rms have

increased theirwaste recycling


37/52

37

Denition o waste and resource eciency

The Waste Framework Directive denition o waste takesno account o the advances in waste recovery, reuseand recycling over the last 20 years. Uncertainty aboutwhen waste ceases to be waste and becomes a resourceremains a signicant barrier to achieving a shit in ecientwaste-resource management.

- We need a claried, risk-based and fexible denitiono waste that would allow small businesses to makesustainable use o existing resources. This is signicantor small businesses because when an item is dened aswaste the ull administrative burden must be applied toits disposal

- There should also be a thorough review o all wasteregulations by Government in order to lessen theadministrative burden on small businesses and to allowcreate greater scope or the innovative reuse o materials

Waste Electrical and Electronic Equipment (WEEE)

Under the Duty o Care regulations WEEE could beconsidered as general waste and hence sent to landll.Yet, or many small businesses, WEEE is a valuedresource that many choose to reuse and recycle in asustainable manner.

- The regulations should make it clear that WEEE shouldbe treated as a separate waste stream under the Dutyo Care regulations in order to allow or the sustainablereuse o electrical and electronic equipment

25%o rms have reducedthe amount o wastegoing to landll

Low Carbon Economy


38/52

Maniesto 2010 38

Exploit the opportunities provided

by a low-carbon economy

A helping hand to realise the potential

o a low-carbon economy

The value to the UK economy o low-carbon goods is alreadyworth 106 billion a year and this will grow dramatically overthe next 10 years.56 Small businesses and new start-upsare well positioned to take advantage o new markets, therenewable energy market being just one channel or ambitiousentrepreneurs.

However, the UK is ailing to realise the ull potential o theburgeoning green, low-carbon economy. The FSB would liketo see action in the ollowing areas.

The FSB recommends:

Improving and expanding low-carbon business support

and incentives

Currently, business support or the low carbon sector istoo complicated. Businesses need to apply repeatedlyor unding at diering stages o the innovation process,leading to delays in development and uptake o newtechnologies.

There should be greater use o whole-project undingrom conception to completion or low-carbon innovation.This is used eectively in the US deence sector, wherepromising new technologies are ast-trackedto completion.

Using private and public unds to encourage

low-carbon innovation

The Carbon Trusts business incubator scheme, whichgives support to start-up companies, is a good exampleo what can be achieved through the use o public/privateunding, but there is a much greater role or business

incubators and public-private hybrid unds.The UK Innovation Investment Fund should target thesmall-business sector, which nds it hard to raise venturecapital but is at the oreront o low-carbon innovation.

56 Low-Carbon and Environmental Goods and Services: An Industry Analysis, Innovas (March 2009)

www.sb.org.uk

24%o rms have investedin energy ecientappliances


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39 Local Communities

Section 6:

Local CommunitiesSmall businesses are not just a part o the local

community, theyare the local community Yet

in towns and villages across the UK, our local

businesses ace closure Even beore the recession,

we were losing our local shops at a rate o over 2000

a year; we are currently loosing 7 pubs a day57

There is no single solution to this crisis, which

results rom poor policy decisions in a range o

areas In response, the FSB set up and ran a high

prole awareness campaign to Keep Trade Local

It has mobilised thousands o activists across the

UK to challenge planning decisions, campaign

against parking charges and petition against

post oce closures

We are making progress: the Government has

secured the uture o the Post Oce by adopting

the FSBs proposal or a Post Bank and the

Conservatives have promised to make Small-

Business Rates Relie automatic, but more

remains to be done

57 http://www.publications.parliament.uk/pa/cm200809/cmselect/cmberr/26/26i.pd (Nov 2009)2,000a year

Small shops close at a rate o over 2,000 a year

- Reorm planning

- Curb parking charges

- Make businessrates automatic

- Save our pubs reorm the pub tie

- Tackle crimes againstbusiness

- Revolutionise thePost Oce

- Simpliy public procurement

- Prioritise tourism


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Reorm planning

A planning system or sustainable

communities

The planning process plays a pivotal role in creating andnurturing sustainable communities. Small businessesoperating in a town centre oer a varied shopping experienceor the public and help prevent town centres rom becomingeither ghost or clone towns. They also provide jobs and localwealth creation.

Two key problems or small businesses are the attraction orlocal and regional planning ocers to approve out o townshopping centres too easily, and the concern that local highstreets are being emptied o individual small businesses.

To make sure town centres are at the heart o sustainablecommunities, the FSB recommends the ollowingstrategic points:

- The Needs Test should be brought back and given tolocal planning authorities to help small businesses andtown centres

- Local Development Frameworks should positively

and proactively plan or economic growth, simpliy theplanning process and take into account need and useo land

- A strong evidence base is needed or all regional andlocal planning decisions

- Stating the importance o rural businesses in planningguidance documents and showing fexibility or re-useand conversions o existing properties

Regional planning or town centres

Regional planning authorities, such as RegionalDevelopment Agencies (RDAs), should engage with

regional business leaders and organisations to identiywhere the major economic networks are, where provisionsare being carried out and where they are missing. Theymust also make these choices early and consult ully withthose business sectors that are needed to help economicdevelopment. Strong evidence is needed or all regionaldecision and this must be made public.

Local planning or town centres

Where existing town centres are in decline, local planningauthorities must consider diversiying local plans to allowor more development to take place without impacting onthose existing businesses. Where the decline in an existingcentre is irreversible local planning authorities must looktowards which service providers, both public agency andprivate enterprise, would help revive this downward spiral.

Planning or our rural areasSustainable development and environmental stewardshipare essential to a successul modern countryside yet therole o a vibrant rural economy in creating successul ruralcommunities has been grossly undervalued by the currentplanning system.

Local planning authorities use a range o closely deneduses or land and existing buildings that continue to ocuson traditional rural economic activity such as arming.This leads to an out o date perception o modernrural economies.

- Planning guidance must state that all types o business

can be appropriate or the countryside, subject to asucient impact assessment being carried out. There isa preconception that rural areas are only suitable only ortraditional rural business activity

- Government planning guidance should clearly statethat rural economies have a crucial role to play insustaining rural communities. Central planning guidanceshould not presumes there is a confict betweeneconomic development, sustainable development andenvironmental stewardship

- Planning guidance should be more fexible towardthe re-use and conversion o existing buildings.Current planning guidance limits the number oavailable business premises but also hampersbusinesses that are looking to expand, particularlyarmers looking to diversiy

We are currentlylosing7 pubs

a day


41/52

Local Communities41

Curb parking charges

Parking policy should not be

a revenue grab

Local authorities are using parking charges as a source orevenue, but in market towns across the country this strategyis bleeding our high streets dry. In 2005, local authorities made1.6billion rom parking charges and nes, up rom 628million in 1997.58

The FSB is concerned that, as a result o the recession,nancial pressures on local authorities could make thissituation worse. This would be a short-term money grab withdisastrous medium-term eects on the local economy.A similar eect is seen with road tolls, which increase theoverall road cost on business and remove a signicant barrierto business growth.

There can be no one approach to parking policy. Dierentcircumstances require dierent policies.

Small retailers typically require opportunities or servicingclose to their premises and or their customers to be ableto park close to the shop. A mix o small shops, cas,restaurants and bars require a fexible regime at dierent timeso the day, week or year to best serve their customers. Allthese actors need to be taken into account when decidingparking policy. Workplace parking levies also have thepotential to increase costs or small businesses at a timewhen access to nance is at its most dicult.

The FSB recommends:

Parking schemes and charges should be tailored to

the individual locality, including taking into account

the wider interests o the local community, particularly

small businesses

Local authorities must start regarding parking as a vital

service, integral to the survival o the local economy,and not as an additional source o short-term revenue

Local authorities should do away with plans to

introduce workplace parking levies which will cause

businesses to pass on higher prices to their sta and

customers

The UK Government should remove all road tolls

along the lines o Scottish Government policy reducing

the overall road cost on businesses and allowing

or growth

58 http://www.mb.co.uk/ea/pd_ea/sub_071023ConsPartySmallShopsInquiry.pd (Nov 2009)

1.6billionrom parkingcharges and nes

In 2005, local authoritiesmade 16 billion rom parkingcharges and nes, up rom628 million in 1997


42/52


Make business rates relie automatic

Bring business rates into line with

other countries

Business rates represent the third-largest overhead or asmall business and during these dicult times, many smallbusinesses will be struggling with payments. In 2008/2009,the Government raised 23billion rom business rates,which accounted or 4.2 per cent o total revenue.59 Setinternationally, this represents three times more than any otherEuropean country and more than the USA.

The FSB believes that more can be done to direct relieto small businesses struggling with rates payments. Thisassistance would help keep small businesses afoat and helpthem to plan or the longer term, to employ more sta andto innovate.60

The FSB recommends:

Making Small-Business Rate Relie (SBRR) automatic

The Local Government Association (LGA) estimates that50 per cent o small businesses eligible or SBRR do notreceive relie. Government should automate delivery oSBRR to ensure that savings already allocated reachtheir target.

Bringing Empty Properties Relie back in line with pre-

2007 policy

The retail sector alone has an aggregated Rateable Valueo 38bn and current estimates show 7 per cent o thisstock is vacant. This equates to over 2.5bn.61 Whilewe welcome temporary relie being brought back or2009/2010, the FSB would like to see this relie re-appliedat 50 per cent, as allowed or in the legislation.

Discouraging local authorities rom using the Business

Rates Supplement

At a time o economic diculty it is unreasonable to place

an extra tax on small rms. Ministers should ensure thatthis potentially damaging Bill does not have its heaviestimpact on the small-business community.

Extending Rural Rate Relie

The FSB is particularly concerned about the plight o solevillage businesses during the downturn. Currently, there isa 50-per-cent mandatory rural rate relie or some villagebusinesses and local authorities have the discretion togrant up to 100-per-cent relie, but this is rarely oeredowing to nancial constraints.

The Non-Domestic Rates pool und is topped by up by theTreasury to enable local authorities to grant 100-per-cent

rural rate relie to those vital services and businesses thatare at the heart o rural community lie. This emergencymeasure should last or a period o 12 months.

59 Pre-Budget Report (2008)60 FSB Credit Crunch poll (April 2009)61 http://www.rics.org/Practiceareas/Property/Commercial/Taxation/ RICSviewemptypropertyraterelie.html (Nov 2009)

Sources: Land Value

Taxation or the beneft o

the Community: A Review o

the Current Situation in the EU

by Lichfeld, N.

Documents

Small Business, Big Vote-UK-2010